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Worthington Reports Fourth Quarter and Fiscal Year Results


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COLUMBUS, OH -- (Marketwired) -- 06/27/13 -- Worthington Industries, Inc. (NYSE: WOR) today reported net sales of $704.1 million and net earnings of $33.5 million, or $0.46 per share, for its fiscal 2013 fourth quarter ended May 31, 2013. In the fourth quarter of the prior year, the Company reported net sales of $755.4 million and net earnings of $52.1 million, or $0.75 per share.

The current quarter included several impairment and restructuring charges totaling $10.8 million, pre-tax. The most significant were a $4.8 million charge for the write-off of the investment in the 40% owned China metal framing joint venture, a $3.0 million charge for the partial impairment of the Pressure Cylinders investment in its 60% owned consolidated joint venture in India, and a $2.5 million accrual for expected severance associated with the previously announced consolidation of the BernzOmatic hand torch manufacturing operation in Medina, N.Y. into the Company's Chilton, Wis., facility. These charges reduced net earnings in the current quarter by $0.14 per share. In addition, inventory holding losses in the current quarter further reduced earnings by $0.02 per share.

For the fiscal year ended May 31, 2013, the Company reported net earnings of $136.4 million, or $1.91 per share. Net sales were $2,612.2 million, up 3%, or $77.5 million, primarily due to acquisitions, but partially offset by lower average selling prices, which were impacted by the declining market price of steel. Current year earnings were adversely affected by impairment and restructuring charges totaling $13.0 million, pretax, or $0.17 per share. In the prior year, earnings included $6.2 million of pre-tax restructuring charges, or $0.06 per share.

The consolidated results for the current and comparative periods are as follows:

(U.S. dollars in millions, except per share data)

4Q 2013 3Q 2013 4Q 2012 12M 2013 12M 2012
Net sales $704.1 $619.5 $755.4 $2,612.2 $2,534.7
Operating income 33.5 33.4 59.5 129.1 101.6
Equity income 21.0 25.7 22.2 94.6 92.8
Net earnings 33.5 37.1 52.1 136.4 115.6
Earnings per share $0.46 $0.52 $0.75 $1.91 $1.65

"We had a solid performance this quarter and an excellent fiscal year. Excluding impairment and restructuring charges, we achieved the highest annual earnings per share in our history," said John McConnell, Chairman and CEO. "There was some softening in Steel's volumes, largely attributable to one tolling customer, but the results were strong from Cylinders as the segment increased sales in retail products and alternative fuels, and found new markets in oil and gas through our acquisitions and product development. The Engineered Cabs business remained soft and it is focused on improvement through our Transformation and leadership changes. The joint ventures had a very strong performance this quarter, particularly WAVE, ClarkDietrich and TWB."

Consolidated Quarterly Results

Net sales for the fourth quarter were $704.1 million, down 7% from the comparable quarter in the prior year, when net sales were $755.4 million. The decrease resulted largely from lower average selling prices, primarily in Steel Processing, which were affected by the declining market price of steel.

Gross margin for the current quarter was $111.1 million, compared to $121.5 million in the prior year quarter. The $10.4 million decrease was primarily the result of lower overall volumes.

SG&A expense increased $6.3 million over the prior year quarter, primarily due to acquisitions.

Operating income for the current quarter was $33.5 million, compared to $59.5 million in the prior year quarter. This $26.0 million decrease was driven by lower volumes in Steel Processing and Engineered Cabs combined with $7.0 million of impairments and restructuring charges. The current quarter charges include a $5.0 million impairment charge related to the consolidated joint venture in India ($5.0 million represents 100% of the charge, while 40%, or $2.0 million, is eliminated in earnings attributable to non-controlling interests, resulting in a net reduction to earnings of $3.0 million). Severance costs related to the Medina consolidation are expected to be $2.5 million. These charges are recorded in Pressure Cylinders.

Interest expense was $6.2 million for the current quarter, compared to $5.0 million in the comparable period in the prior year, as the impact of higher average interest rates from an increase in the usage of long-term debt versus short-term debt, more than offset the impact of lower average debt levels.

Unconsolidated joint ventures had net sales totaling $447.0 million and contributed $21.0 million in equity income in the current quarter. This is a $1.2 million decrease from the comparable quarter in the prior year, but the current quarter included a $4.8 million charge for the write-off of the investment in the China joint venture. With the exception of the China joint venture, all unconsolidated joint ventures posted positive results, led by WAVE, TWB, and ClarkDietrich, which contributed $15.3 million, $3.7 million, and $2.9 million of equity income, respectively. The equity income from ClarkDietrich and WAVE exceeded the prior year quarter by $2.7 million and $1.1 million, respectively.

For the current quarter, income tax expense of $16.7 million was lower than the $23.2 million expense in the prior year quarter. This was primarily due to lower taxable income. The current quarter tax expense reflected an effective rate of 33.3% compared to 30.9% for the prior year quarter. The impairment charges increased the effective tax rate, as a tax benefit was not provided by all of the charges.

Balance Sheet

At quarter end, total debt was $521.1 million, up $82.8 million from February 28, 2013, as the acquisition of the Palmer business raised borrowing needs. As of May 31, 2013, the Company had utilized all of the $100.0 million available under its trade accounts receivable securitization facility, and $8.3 million was drawn on the Company's $425.0 million revolving credit facility.

Quarterly Segment Results

Steel Processing's net sales of $374.6 million were down 13%, or $55.0 million, from the prior year quarter. Lower average selling prices negatively impacted net sales by $30.9 million, and lower direct and toll processing volumes reduced sales by $24.1 million. The mix of direct versus toll processing tons was 56% to 44% this quarter, compared with 53% to 47% in the comparable quarter of the prior year. Operating income decreased $13.2 million due to the lower volumes, and the negative impact of inventory holding losses compared to gains in the prior year quarter. The prior year quarter also included a $2.1 million gain from the sale of the Vonore, Tenn. facility. These decreases were partially offset by lower operating expenses.

Pressure Cylinders' net sales of $252.3 million were up 7%, or $15.5 million, from the comparable prior year quarter aided by the acquisitions of Westerman and Palmer. Pressure Cylinders' operating income was $16.4 million, down $5.4 million from the prior year quarter. The decrease was driven by the $5.0 million impairment charge related to the consolidated joint venture in India and the $2.5 million severance charges for Medina. Excluding these items, operating income was up due to the impact of acquisitions.

Engineered Cabs generated net sales of $55.1 million in the current quarter and reported an operating loss of $1.2 million. These results were impacted by lower volumes from its largest customer, which had lower demand and experienced production delays during the quarter.

The "Other" category includes the Construction Services, Energy Innovations and Steel Packaging operating segments, as well as other non-allocated expenses. Operations in this category reported net sales of $22.0 million, which were down $2.9 million compared to the prior year quarter. These operations reported a combined loss of $1.0 million for the quarter compared to $1.1 million in the prior year quarter.

Fiscal 2013 and Recent Business Developments

  • On August 10, 2012, the Company issued $150.0 million aggregate principal amount of 12-year Senior Notes due 2024 through a private placement with Prudential Capital Group. The Senior Notes bear interest at a fixed rate of 4.6%.

  • On September 17, 2012, the Company acquired Westerman, Inc., a leading manufacturer of tanks and pressure vessels for the oil and gas and nuclear markets, as well as joists for marine applications. Westerman is included in the Pressure Cylinders business segment.

  • On April 9, 2013, the Company acquired the business of Palmer Mfg. & Tank, Inc., a manufacturer of steel and fiberglass tanks and processing equipment for the oil and gas industry, and custom manufactured fiberglass tanks for agricultural, chemical and general industrial applications. The purchase price was $113.5 million. Palmer is included in the Pressure Cylinders business segment.

  • On May 21, 2013, the Company announced that John Lamprinakos will become the next president of Engineered Cabs effective July 1, 2013, replacing Robert Kluver who is retiring in December. Charlie Chiappone was announced as Lamprinakos' successor as president of WAVE - Worthington Armstrong Venture.

  • During the fourth quarter, the Company repurchased a total of 925,000 common shares for $30.4 million at an average price of $32.88.

  • On June 21, 2013, the Company announced the consolidation of BernzOmatic hand torch manufacturing operations in Medina, N.Y. into its existing facility in Chilton, Wis. The Company estimates that the consolidation and closure will result in one-time restructuring charges in the range of $4.0 million to $5.0 million, primarily due to severance costs, relocation and equipment installation, training costs and other miscellaneous start-up costs.

  • On June 26, 2013, the board of directors declared a quarterly dividend of $0.15 per share, an increase of $0.02 per share from the prior quarter. The dividend is payable on September 27, 2013 to shareholders of record September 13, 2013.


"Our outlook remains positive. We are positioned for growth both organically and from our acquisitions," said McConnell. "We enter the new fiscal year with a solid strategy focused on continuing to deliver strong results with a dedicated management team and workforce. There is continued strength in automotive with shortened or eliminated summer shutdowns and we anticipate some improvement in commercial construction. Our Cylinders business has nicely integrated its two recently acquired businesses in the oil and gas tank market. We believe that Engineered Cabs is a good business that will benefit this year from the full implementation of the Transformation to optimize and improve operations."

Conference Call

Worthington will review fourth quarter and full-year results during its quarterly conference call on June 27, 2013, at 1:30 p.m., Eastern Daylight Savings Time. Details regarding the conference call can be found on the Company web site at

Corporate Profile

Worthington Industries is a leading diversified metals manufacturing company with 2013 fiscal year sales of $2.6 billion. The Columbus, Ohio based company is North America's premier value-added steel processor and a leader in manufactured pressure cylinders, such as propane, oxygen and helium tanks, hand torches, refrigerant and industrial cylinders, camping cylinders, exploration, recovery and production products for global energy markets; scuba tanks, and compressed natural gas storage cylinders; custom-engineered open and enclosed cabs and operator stations for heavy mobile equipment; framing systems for mid-rise buildings; steel pallets and racks; and through joint ventures, suspension grid systems for concealed and lay-in panel ceilings, current and past model automotive service stampings, laser welded blanks, and light gauge steel framing for commercial and residential construction. Worthington employs more than 10,000 people and operates 83 facilities in 11 countries.

Founded in 1955, the Company operates under a long-standing corporate philosophy rooted in the golden rule. Earning money for its shareholders is the first corporate goal. This philosophy serves as an unwavering commitment to the customer, supplier, and shareholder, and it serves as the Company's foundation for one of the strongest employee-employer partnerships in American industry.

Safe Harbor Statement
The Company wishes to take advantage of the Safe Harbor provisions included in the Private Securities Litigation Reform Act of 1995 (the "Act"). Statements by the Company relating to outlook, strategy or business plans; future or expected growth, performance, sales, volumes, cash flows, earnings, balance sheet strengths, debt, financial condition or other financial measures; projected profitability potential, capacity, and working capital needs; demand trends for the Company or its markets; additions to product lines and opportunities to participate in new markets; pricing trends for raw materials and finished goods and the impact of pricing changes; anticipated capital expenditures and asset sales; anticipated improvements and efficiencies in costs, operations, sales, inventory management, sourcing and the supply chain and the results thereof; the ability to make acquisitions and the projected timing, results, benefits, costs, charges and expenditures related to acquisitions, newly-created joint ventures, headcount reductions and facility dispositions, shutdowns and consolidations; the alignment of operations with demand; the ability to operate profitably and generate cash in down markets; the ability to maintain margins and capture and maintain market share and to develop or take advantage of future opportunities, new products and new markets; expectations for Company and customer inventories, jobs and orders; expectations for the economy and markets or improvements therein; expected benefits from transformation plans, cost reduction efforts and other new initiatives; expectations for increasing volatility or improving and sustaining earnings, earnings potential, margins or shareholder value; effects of judicial rulings and other non-historical matters constitute "forward-looking statements" within the meaning of the Act. Because they are based on beliefs, estimates and assumptions, forward-looking statements are inherently subject to risks and uncertainties that could cause actual results to differ materially from those projected. Any number of factors could affect actual results, including, without limitation, the effect of national, regional and worldwide economic conditions generally and within major product markets, including a prolonged or substantial economic downturn; the outcome of negotiations surrounding the United States debt and budget, which may be adverse due to its impact on tax increases, governmental spending, and customer confidence and spending; the effect of conditions in national and worldwide financial markets; product demand and pricing; changes in product mix, product substitution and market acceptance of the Company's products; fluctuations in the pricing, quality or availability of raw materials (particularly steel), supplies, transportation, utilities and other items required by operations; effects of facility closures and the consolidation of operations; the effect of financial difficulties, consolidation and other changes within the steel, automotive, construction and other industries in which the Company participates; failure to maintain appropriate levels of inventories; financial difficulties (including bankruptcy filings) of original equipment manufacturers, end-users and customers, suppliers, joint venture partners and others with whom the Company does business; the ability to realize targeted expense reductions from headcount reductions, facility closures and other cost reduction efforts; the ability to realize other cost savings and operational, sales and sourcing improvements and efficiencies, and other expected benefits from transformation initiatives, on a timely basis; the overall success of, and the ability to integrate newly-acquired businesses and joint ventures, maintain and develop their customers, and achieve synergies and other expected benefits and cost savings therefrom; capacity levels and efficiencies, within facilities, within major product markets and within the industry as a whole; the effect of disruption in the business of suppliers, customers, facilities and shipping operations due to adverse weather, casualty events, equipment breakdowns, acts of war or terrorist activities or other causes; changes in customer demand, inventories, spending patterns, product choices, and supplier choices; risks associated with doing business internationally, including economic, political and social instability, foreign currency exposure and the acceptance of our products in new markets; the ability to improve and maintain processes and business practices to keep pace with the economic, competitive and technological environment; the outcome of adverse claims experience with respect to workers' compensation, product recalls or product liability, casualty events or other matters; deviation of actual results from estimates and/or assumptions used by the Company in the application of its significant accounting policies; level of imports and import prices in the Company's markets; the impact of judicial rulings and governmental regulations, both in the United States and abroad, including those adopted by the United States Securities and Exchange Commission and other governmental agencies as contemplated by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the effect of changes to healthcare laws in the United States which may increase our healthcare and other costs and negatively impact our operations and financial results; and other risks described from time to time in the Company's filings with the United States Securities and Exchange Commission, including those described in "Part I - Item 1A. - Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended May 31, 2012 and in "Part II-Item 1A - Risk Factors" of our Quarterly Report on form 10-Q for the quarterly period ended February 28, 2013.

(In thousands, except per share amounts)
Three Months Ended Twelve Months Ended
May 31, May 31,
2013 2012 2013 2012
Net sales $ 704,060 $ 755,407 $ 2,612,244 $ 2,534,701
Cost of goods sold 592,950 633,939 2,215,601 2,201,833
Gross margin 111,110 121,468 396,643 332,868
Selling, general and administrative expense 70,580 64,318 258,324 225,069
Impairment of long-lived assets 4,968 355 6,488 355
Restructuring and other expense 1,482 1,277 3,293 5,984
Joint venture transactions 584 (3,985 ) (604 ) (150 )
Operating income 33,496 59,503 129,142 101,610
Other income (expense):
Miscellaneous income 388 911 1,452 2,319
Interest expense (6,167 ) (4,980 ) (23,918 ) (19,497 )
Equity in net income of unconsolidated affiliates 21,044 22,211 94,624 92,825
Earnings before income taxes 48,761 77,645 201,300 177,257
Income tax expense 16,744 23,231 64,465 51,904
Net earnings 32,017 54,414 136,835 125,353
Net earnings (loss) attributable to noncontrolling interest (1,506 ) 2,336 393 9,758
Net earnings attributable to controlling interest $ 33,523 $ 52,078 $ 136,442 $ 115,595
Average common shares outstanding 70,201 68,752 69,301 69,651
Earnings per share attributable to controlling interest $ 0.48 $ 0.76 $ 1.97 $ 1.66
Average common shares outstanding 72,999 69,472 71,314 70,252
Earnings per share attributable to controlling interest $ 0.46 $ 0.75 $ 1.91 $ 1.65
Common shares outstanding at end of period 69,752 67,906 69,752 67,906
Cash dividends declared per share $ - $ 0.12 $ 0.52 $ 0.48
(In thousands)
May 31, May 31,
2013 2012
Current assets:
Cash and cash equivalents $ 51,385 $ 41,028
Receivables, less allowances of $3,408 and $3,329 at May 31, 2013 and 2012, respectively 394,327 400,869
Raw materials 175,093 211,543
Work in process 103,861 115,510
Finished products 77,814 74,887
Total inventories 356,768 401,940
Income taxes receivable 724 892
Assets held for sale 3,040 7,202
Deferred income taxes 21,928 20,906
Prepaid expenses and other current assets 38,711 41,402
Total current assets 866,883 914,239
Investments in unconsolidated affiliates 246,125 240,882
Goodwill 213,858 156,681
Other intangible assets, net of accumulated amortization of $26,669 and $16,103 at May 31, 2013 and 2012, respectively 147,144 100,333
Other assets 17,417 22,585
Property, plant and equipment, net 459,430 443,077
Total assets $ 1,950,857 $ 1,877,797
Liabilities and equity
Current liabilities:
Accounts payable $ 222,696 $ 252,334
Short-term borrowings 113,728 274,923
Accrued compensation, contributions to employee benefit plans and related taxes 68,043 71,271
Dividends payable 551 8,478
Other accrued items 36,536 38,231
Income taxes payable 6,268 11,697
Current maturities of long-term debt 1,092 1,329
Total current liabilities 448,914 658,263
Other liabilities 70,882 72,371
Distributions in excess of investment in unconsolidated affiliate 63,187 69,165
Long-term debt 406,236 257,462
Deferred income taxes 89,401 73,099
Total liabilities 1,078,620 1,130,360
Shareholders' equity - controlling interest 830,822 697,174
Noncontrolling interest 41,415 50,263
Total equity 872,237 747,437
Total liabilities and equity $ 1,950,857 $ 1,877,797
(In thousands)
Three Months Ended Twelve Months Ended
May 31, May 31,
2013 2012 2013 2012
Operating activities
Net earnings $ 32,017 $ 54,414 $ 136,835 $ 125,353
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization 18,333 15,247 66,469 55,873
Impairment of long-lived assets 4,968 355 6,488 355
Provision for deferred income taxes (8,052 ) (6,736 ) 1,798 775
Bad debt expense 208 134 783 339
Equity in net income of unconsolidated affiliates, net of distributions 8,308 (2,730 ) (10,948 ) (1,019 )
Net loss (gain) on sale of assets 1,343 (3,993 ) 1,121 (5,918 )
Stock-based compensation 2,684 3,166 13,270 11,742
Excess tax benefits - stock-based compensation (1,728 ) (578 ) (5,183 ) (578 )
Changes in assets and liabilities, net of impact of acquisitions:
Receivables (8,277 ) (26,493 ) 18,801 956
Inventories 34,372 (6,416 ) 77,115 17,310
Prepaid expenses and other current assets (763 ) (4,648 ) 871 8,478
Other assets 1,501 2,347 4,636 4,141
Accounts payable and accrued expenses (12,612 ) 11,024 (47,483 ) (45,847 )
Other liabilities 4,992 1,601 8,404 1,689
Net cash provided by operating activities 77,294 36,694 272,977 173,649
Investing activities
Investment in property, plant and equipment, net (10,186 ) (15,913 ) (44,588 ) (31,713 )
Acquisitions, net of cash acquired (113,115 ) (7,680 ) (175,225 ) (239,851 )
Distributions from unconsolidated affiliates 863 2,641 863 45,879
Proceeds from sale of assets 747 22,565 16,974 37,089
Net cash provided (used) by investing activities (121,691 ) 1,613 (201,976 ) (188,596 )
Financing activities
Net proceeds from (repayments of) short-term borrowings 83,140 (10,833 ) (168,446 ) 97,626
Proceeds from long-term debt - 5,880 150,000 5,880
Principal payments on long-term debt (310 ) (247 ) (1,480 ) (342 )
Proceeds from issuance of common shares 4,954 1,407 37,914 11,116
Excess tax benefits - stock-based compensation 1,728 578 5,183 578
Dividends from (payments to) noncontrolling interest, net (672 ) 250 (9,254 ) (9,494 )
Repurchase of common shares (30,417 ) (21,298 ) (30,417 ) (73,418 )
Dividends paid - (8,282 ) (44,144 ) (32,138 )
Net cash provided (used) by financing activities 58,423 (32,545 ) (60,644 ) (192 )
Increase (decrease) in cash and cash equivalents 14,026 5,762 10,357 (15,139 )
Cash and cash equivalents at beginning of period 37,359 35,266 41,028 56,167
Cash and cash equivalents at end of period $ 51,385 $ 41,028 $ 51,385 $ 41,028
(In thousands)
This supplemental information is provided to assist in the analysis of the results of operations.
Three Months Ended Twelve Months Ended
May 31, May 31,
2013 2012 2013 2012
Steel Processing (tons) 703 797 2,659 2,898
Pressure Cylinders (units) 23,363 24,011 82,189 71,777
Net sales:
Steel Processing $ 374,645 $ 429,615 $ 1,443,499 $ 1,578,509
Pressure Cylinders 252,328 236,818 859,264 770,101
Engineered Cabs 55,075 64,099 226,002 104,272
Other 22,012 24,875 83,479 81,819
Total net sales $ 704,060 $ 755,407 $ 2,612,244 $ 2,534,701
Material cost:
Steel Processing $ 265,491 $ 305,698 $ 1,036,075 $ 1,159,316
Pressure Cylinders 123,854 117,161 409,101 386,727
Engineered Cabs 26,912 31,790 112,769 53,905
Selling, general and administrative expense:
Steel Processing $ 29,013 $ 29,356 $ 107,931 $ 109,147
Pressure Cylinders 31,366 23,735 106,947 83,093
Engineered Cabs 6,878 6,195 27,448 10,499
Other 3,323 5,032 15,998 22,330
Total selling, general and administrative expense $ 70,580 $ 64,318 $ 258,324 $ 225,069
Operating income (loss):
Steel Processing $ 19,279 $ 32,509 $ 66,116 $ 71,578
Pressure Cylinders 16,402 21,775 66,367 45,108
Engineered Cabs (1,209 ) 6,325 4,158 4,878
Other (976 ) (1,106 ) (7,499 ) (19,954 )
Total operating income $ 33,496 $ 59,503 $ 129,142 $ 101,610
The following provides detail of impairment of long-lived assets and restructuring and other expense and joint venture transactions included in operating income by segment presented above.
Three Months Ended Twelve Months Ended
May 31, May 31,
2013 2012 2013 2012
Impairment of long-lived assets and restructuring and other expense (income):
Steel Processing $ - $ - $ - $ -
Pressure Cylinders 7,450 52 9,153 52
Engineered Cabs - - - -
Other (1,000 ) 1,580 628 6,287
Total impairment of long-lived assets and restructuring and other expense $ 6,450 $ 1,632 $ 9,781 $ 6,339
Three Months Ended Twelve Months Ended
May 31, May 31,
2013 2012 2013 2012
Joint venture transactions:
Steel Processing $ - $ (2,102 ) $ - $ (2,102 )
Pressure Cylinders - - - -
Engineered Cabs - - - -
Other 584 (1,883 ) (604 ) 1,952
Total joint venture transactions $ 584 $ (3,985 ) $ (604 ) $ (150 )

Cathy M. Lyttle
VP, Corporate Communications and Investor Relations
Phone: (614) 438-3077
E-mail: Email Contact

Sonya L. Higginbotham
Director, Corporate Communications
Phone: (614) 438-7391
E-mail: Email Contact

Source: Worthington Industries, Inc.

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